Details of the FTHBI – First Time Home Buyer Incentive
The First-Time Home Buyer Incentive (FTHBI) officially starts on September 2, 2019. Introduced help first-time home buyers, the FTHBI will provide shared equity loans of 5% toward the down payment of a resale home, and 5% or 10% for newly-built homes.
The idea is that by boosting the size of buyers’ down payments, the FTHBI lowers the monthly mortgage payment and is some relief on the costs of home ownership.
Details of Qualification
To qualify for the FTHBI, home buyers must satisfy the following:
- At least one person in the household must be a first-time home buyer, meaning they have not owned a home, or dwelled in a home owned by their spouse, over the last four years. (An exception is made for buyers who’ve had a breakdown of marriage or common-law relationship.)
- Buyers must have a minimum of 5% down payment from “own resources” to qualify for a CMHC insured mortgage.
- Buyers’ combined household income cannot exceed $120,000. This includes the income of any guarantors co-signing on the mortgage, as well as any rental income generated if part of the home is tenanted out.
- The buyers’ Mortgage-to-Income Ratio (MTI) cannot exceed 4x their income, including the portion that’s provided by the FTHBI. This means the maximum down payment for a resale home cannot exceed 14.99%, and 9.99% for a new build.
Details of How It Works
The funds provided are registered as a second mortgage on title, and don’t incur interest.
This second mortgage must be paid back in full when the first insured mortgage matures at 25 years or when the home is sold, whichever comes first. Homeowners may pay it back as a lump sum early without penalty. (Details of how the value at the time of payout are yet to be released.)
Because it is a shared equity mortgage, the amount to be paid back fluctuates along with the value of the home over time: if the home’s assessed value rises, the loan repayment will increase by the same percent. However, the same will occur if the home has lost value by the time it is sold or the mortgage matures.
There are more details on the last post on savings including this chart below: https://markherman.ca/updates-to-cmhc-first-time-buyer-incentive-program/
Savings Over Time
This is a handy chart to see the savings on the monthly payment when using the program.
The program looks to be a helper for saving on payments and that is a great thing.
Mark Herman, Top& Best Calgary Mortgage Broker